Good afternoon, everyone, and welcome to our first Finance and Neighborhoods Committee of this year.
It is 2 o'clock, January 9th, 2019. Very happy to have you all here today.
And we're excited because we're going to hear first about our sugary beverage tax and the sales of the beverage.
various items that have been taxed this last year.
We're also going to have some appointments and some reappointments.
Very happy that Glenn Lee's here, JJ McKay, and a reappointment of Mary McCumber.
So after we get past our public comment period and our reappointments, then we're going to have this briefing from the University of Washington and our auditor's office.
So I want to say thank you in advance for those of you who are here, really appreciate all of your hard work.
So, with that, let's just dive right into public comment.
Alex, you're the only person that signed up, so we're going to invite you to the microphones.
You have two minutes, Alex.
Thank you very much for sugar tax, Mr. President.
Bye.
Okay.
Thank you for coming, President Harrell.
And we will just bring up Glenn Lee, JJ McKay.
And I think, do you want to just bring everybody up?
Yeah.
Yeah, let's just do that.
Would you like me to read the first one?
I think you should.
Thank you.
You're so welcome.
Item number one, appointment of Glenn Lee as a member of the Benaroya Hall Music Center Board.
Very interesting.
Good.
All right.
Well, let's just jump in.
Do you want to introduce him?
Here on behalf of Benaroya Hall.
Oh, nice.
Well, good to see you.
Please introduce yourself and then we'll.
My name is Tom Owens.
I'm on the Benaroya Hall Symphony Board.
and the Benner Hall Board, and I'm here to recommend that you do appoint Glenn Lee to our board as your representative, because he's a very intelligent, capable guy, and we'd love to have him.
That's great.
It's because of all of those charming attributes, not because of your position as finance.
Yes, my name is Glenn Lee, and I'm the city finance director.
And I am thrilled to be here today.
So are you being appointed because of your finance position or because everybody just loves you and wants you to be on their board?
It's truly an honor to be a part of one of the iconic places in the city to be supporting in any way I can.
So I believe the selection process was from both the organization as well as the mayor's office, so I am thrilled to be part of this.
Very good.
Well, we all know you.
We've worked with you in many different phases of your career.
Do you have any questions?
No, I'm very supportive, Glenn.
Thanks for serving.
I did have a question about the format on the The self-identified diversity chart is completely blank.
Who fills these documents out and why aren't they filled out?
It's possible that symphony board didn't know about this and also the districts are not there.
So there's typically a board person that we engage with directly and she is on maternity leave.
So Tom is filling in at the table for her.
So, the current coordinator is out.
So, what is it would you like to know Mr. Harrell?
I know we have.
Why it's blank.
Why it's blank and which.
These first columns here Tom.
All right D, G, and R, D. Correct.
And it has nothing to do with Mr. Lee's appointment.
I'm going to support your appointment.
Thank you.
I don't think it makes sense when the city provides forms and we're trying to capture as much demographic data as possible based on gender, race, whatever districts they're in, that we just submit blank forms and act like...
I get it.
Yeah, I agree with you.
And we do realize we have certain challenges for many boards and many commissions, more challenges than others in trying to reach some diversity.
So this is not a slap in anyone's face, but I just hope that, I don't know if it's...
I shouldn't be the one.
I hate being the diversity cop.
I mean, I just, why am I the only one seeing that these blank, these forms are...
So anyway, we'll clean up it.
We'll fix it on our end, figure out where it broke down.
Pass that back.
We will, Council President Harrell, make sure that we get to the individuals that can give us this information and we'll bring it down to your office and distribute it to our other colleagues as soon as we get it.
Very good.
But in the meantime, I would like to move forward with the nomination for Mr. Lee.
I second.
OK.
All those in favor to be appointing Glenn to the Ben Roy Hall Music Center Board of Directors say aye.
Aye.
None opposed and no abstention.
So it looks like things are going to go well for you on Monday.
Thank you.
Thank you very much.
Thank you for coming.
And how will we go about fixing the chart?
I will reach out to Rita upstairs and figure out what was the holdup.
Okay.
Thanks.
I appreciate it.
Thank you.
Thanks for sharing.
We'll make sure that you have it.
Thank you.
Okay.
Do you want to read in the next ones?
I'd love to.
Item number two, appointment number 01233, appointment of J.J.
McKay as the member of the Pike Place Market Preservation Development Authority Governing Council for a term to June 30th, 2022.
Very nice.
So, J.J., would you like to just start off with introductions, and we'll just go right down the line to Mary and Ken.
J.J. McKay.
I am the founder and publisher of The Fresh Toast.
I'm also a board member of U.S.
Bank and an immediate past chairman of Mears Place.
Very nice.
And we've got your name, but pull this thing close to you.
Very good.
Mary, very good to see you.
Mary Bacarella, executive director of the Pike Place Market PDA.
And Kenny Pittman, officer in the government relations.
Good.
Thank you.
All right.
Well, Kenny, this is great that you are willing to do this.
I know your schedule is extremely busy.
We can use your expertise.
Kenny or Mary, would you like to just speak on his behalf first before we grill him?
Yes.
Thank you, Madam Chair.
We'd like to present Mr. J.J. McKay as a mayoral appointee for a four-year term to the Pike Place Market PDA.
He's one of the four appointees by Mayor Durkin.
and we are very proud to present this for your approval.
Mr. McKay brings 28 plus years experience in non-profit and the for-profit sector.
A lot of international, I mean, organizational growth, strategic partnership, board governance, community outreach, extensive background, and we feel he will be an asset to both the Pike Place Market and the City of Seattle.
Great.
Mary, you're nodding your head.
I'm just really excited to be working with JJ.
He brings a lot of things that we need on the council at the PDA.
Great.
What I love about this, of course, JJ, you and I have worked together for a decade now, and I appreciate your knowledge of our downtown, what you have been doing for our neighborhoods and community, and then really tying in with Pike Place Market is fabulous.
So thank you.
So would you like to talk to us a little bit about why do you want to do this?
You know, I moved here a little over 15 years ago, and I think Pike Place Market is an anchor for the city and especially for our downtown neighborhoods.
And as we look as moving into this new era with Amazon, you look at a change in downtown, a change in how people shop.
So it's, you know, I think I bring expertise with partnerships and understanding community as we look to preserve our culture, we look to preserve the market, but also build in a way so we're financially feasible for the future.
And then we're also at a wonderful opportunity where the city physically is changing.
We have the squeeze coming in, which will present fresh opportunities for us.
There's a lot of, you know, there's a redevelopment of parts of downtown.
And I think it's a wonderful way to tap in to preserve our heritage while making sure we continue being a forward-thinking city.
Right, very good.
Talk to me a little bit about Pike Place Market just in the last couple of years, Mary, since you have been, what, are you a year and four months now?
Yesterday was my anniversary.
Your first one year.
Congratulations.
Very good.
How is Pike Place Market thriving in the midst of all of this building with all of the construction, everything?
Are you continuing to see your numbers increase, sales increase?
Can you just give us a little update on that?
Actually, we had a really great 2018. And we're looking forward to 2019, but we really are going to have to keep on track of what things are looking like for not only just who comes to the market to buy and shop, but the people that live there, the people that work there, how they're going to get in to town to be able to do their job.
I completely understand everything that's going on about, you know, working from home and all of that, but that doesn't quite work for us.
So we have to figure out different ways.
So we're literally keeping track.
We have prepared our community really well.
We have to see what happens starting next week.
But we're looking really forward to it.
I mean, we're working very closely with the Office of the Waterfront, the Friends of the Waterfront, the Aquarium, because the Marketfront was the first part of that whole revitalization.
And we're really excited about that.
We just need to know that we have to get through all of this to get to it.
And we'll just continue to work on to make sure that we can thrive.
And like I said, we're at a really good place to start there.
Well, you know how much I personally appreciate the market.
You're four blocks away from my apartment, condominium.
And I use Pike Place Market on a regular basis.
So making sure you do continue to thrive is personally important.
And it still remains, I think, one of the number one tourist attractions of our entire state.
So we know how important it is to others coming into the city.
Anything else you'd like to add?
Because, of course, we're delighted to have you.
And I'm going to recommend your nomination unless you want to say anything else.
I just think this is a huge honor.
I've had a blessing to work with two other great institutions.
There are three other great institutions in the city, the Opera, Pilchuck, and Mary's Place, and so this is, to me, is just a real blessing and honor on my part.
Nice.
Well, thank you very much.
Any other questions?
Good.
Well, I'd like to move the nomination of J.J.
McCabe for this Pike Place Market Preservation and Development Authority Board.
Second.
All those in favor?
Thank you.
Thank you.
All those in favor say aye.
Aye.
Any opposed?
No.
And no abstentions.
Thank you so much.
And thank you for all the good work.
We will bring this forward on Monday where I will continue to sing your praises to the full council.
Thank you so much.
Yeah, thank you.
And thank you for telling Steve how much I enjoy the art.
I will.
Very good.
Thank you, Mary.
Great to have you back here.
Kenny, we have one more.
Yes.
Item number three, appointment 01236, reappointment of Mary McCumber as a member of the Historic Seattle Preservation and Development Authority Governing Council for a term to November 30th, 2022.
Very good.
All right.
Sort of like waving at you down there, Kenny.
Talk to us about Mary.
Most of us know her.
So about this reappointment.
Yeah, this is Mrs. McCumber's sixth term on the Historic Seattle Board, and she has a 27 plus year experience in the public sector.
most recently as the Executive Director of the Puget Sound Regional Council that ended in 2003. And since that time, and before that, she has been on the historic Seattle and been at one time chair and been on the governing council, was also a founding member of Thousand Friends of Washington.
And so- And that became FutureWise, right?
Right.
And is now, an appointee of the Governing Council itself.
She's one of the categories where there's four mayoral, four Governing Council, and four constituency, very similar to what the Pike Place Market is, and she's an appointee of the Governing Council.
Okay, very good.
I actually don't have any questions.
I've known her and have worked with her for years.
Do you have any questions?
No, it's reappointment.
Okay, very good.
So I'd like to...
do you have anything else, Kenny?
I just want to follow up on the previous conversations about the rosters and the council districts and stuff.
When we working with them, especially when there's a reappointment appointment, we get that information.
But I've noticed that in some of our rosters, they're full.
Some of them, they're like maybe half.
And one of the things that we will be doing since it's the start of the year and we start sending out statements of economic interest and stuff, we will now start requiring all board members to fill that out at the beginning of the year and we will update the roster.
So from now on, you will start seeing full rosters at the time of appointments and seeing the previous people.
very good and I noticed on this particular roster to the districts aren't there and if councilmember Juarez were here she'd be jumping down your throat on that so making sure we've get those that we will make sure I mean we send the information out and stuff but we'll make sure it gets in yeah I explained I showed I showed them examples on the Pike Place preservation board isn't as an example of how it's almost always completed and
And even areas where we want to, where we're not doing as well, at least we can recognize them.
So it's just a question of daylighting what we're trying to do is certainly, but I appreciate that and it's sort of a newer process.
It's sort of interesting, like Councilmember Baxter said, that catching the district representation gets very challenging too.
And as you well know, on many of the boards of commissions, there's not a requirement that they even live in Seattle.
And even when we have to go outside for some expertise or something, it's still good to know.
Because if you have a commission with all outside, non-Seattle residents, then we got a problem.
So I appreciate that you're working.
And then one of the things that we use to do is also to help them with recruiting.
So if we notice that there is a lack of diversity, we will mention that to them and say, looking at your board, you need to diversify.
whether it's diversity of color, or sex and gender, or even locations within the city of Seattle.
Very good.
And I'm also going to put in a plug for age-friendly on everything, so that we, as we're looking for appointments, that we include people of all ages and abilities.
As a senior, I appreciate that.
There you go, man.
OK, I would like
I like that age-friendly.
I love that term age-friendly.
And as I get older, I love it even more.
So I would like to move the reappointment of Mary McCumber for the Historic Seattle Preservation and Development Authority.
Second.
Those in favor say aye.
Aye.
None opposed and no abstentions.
Kenny, just let her know that this will be coming forward on Monday as well.
Thank you very much.
Appreciate all your help.
Okay, so the next item of business we have is actually a report.
And this is something that we have asked around our sugary beverage tax for a six-month audit.
And I would like to invite our presenters up to the table.
Thank you so much.
Very good to see you both again.
Thank you, David, for joining us.
And just to remind everybody who may be looking and interested, when we passed the legislation a year ago for the sugary beverage tax, we had asked for a six-month audit on how the sales are going, where the sales may be different.
And I want to recognize that the University of Washington is with us now.
But they also did a great job of setting a baseline.
And I think Nadine, you may want to talk about it as we're kicking off and then our University of Washington folks that had done the data collection and the boots on the ground.
I appreciate very much our PhD that did that work.
So we've got a lot to learn.
And it may look like we're a little slow because I think the report was from this past summer, but that was because we had budget.
And you were ready to present, but we weren't ready to receive.
So I just want to acknowledge that.
It wasn't that you were slow.
So David, would you like to start your introductions?
Thank you, Council Member Beksha.
I'm just going to give a little bit of background before I turn it over to Nadine, and we'll turn it over to Jessica.
For the viewing audience, just a little background.
In June of 2017, the City Council passed an ordinance that we're going to refer to as a sweetened beverage tax, that to tax sugar sweetened beverages distributed in Seattle and included in the ordinances provisions was a requirement for my office, the Office of City Auditor, to contract with academic researchers who, with a proven track record of rigorous policy evaluation, so they can conduct an evaluation of the effects of the tax.
And the ordinance specifically said the evaluation should cover the impacts of the sweetened beverage tax on behavior, health, and economic outcomes.
So our office decided to contract with Public Health Seattle King County to oversee the evaluation because they had a track record and expertise and experience with overseeing these kind of complex evaluations.
And I should note that the ordinance specified that there would be a series of reports over multiple years prepared.
So just to forewarn you, you're going to be getting more of these over the course of the year and the years to come.
So let me turn it over to Dr. Nadine Chan from Seattle Public Health, King County.
Thank you.
So just to set the context, the studies and research shows that sugary drinks are linked to health disparities in diabetes, heart disease and stroke, weight gain, tooth decay.
And so the idea behind the tax is that by taxing sugary drinks, people will buy less of it, people will drink less of it, which would help address some of these health disparities.
And the other angle is that the revenues will be used to fund programs that will improve access to affordable, healthy food, as well as access to early learning programs for families with young kids.
And so, as you mentioned, we came before you and presented the findings that we collected at baseline before the tax went into play.
And here we are today with Dr. Jesse Jones who will be sharing what we have found six months after the tax went into effect in terms of what prices are now that taxes have been in effect.
So with that, I'll just turn it over to Jesse.
Great, thanks.
Is my microphone on?
If you move it close and use your professional voice, it'll be heard.
Great.
Thank you.
And I think you have the slides in your packet, and I'll also be flipping through here on the projector.
So as Nadine said, I'm here to present one component of our evaluation of the Seattle sweetened beverage tax and this component looks at the impact of the tax on the prices of beverages subject to the tax as its key goal.
I'm going to go into some of the details of our methodology, but first just to give you a brief overview, what we've done in this component is conducted in-person, in-store surveys of the prices of beverages, and we visited about 200 stores in Seattle, 200 stores in a comparison area, which is Kent, Auburn, and Federal Way, and we collected prices on beverages from all of those stores.
We did this at baseline, and then we revisited the same stores and collected prices on the same beverages six months after the tax had been in effect, which was in June 2018. Okay, so as you'll recall, the tax in Seattle is a tax that's levied on distributors.
So the reason we did this study is that it was unclear whether distributors would pass through the cost of the tax to retailers who would then potentially pass it on to consumers.
So we were expecting the prices to increase, we just did not know to what degree they would increase.
I'm gonna walk you through some of our key methods and results.
Okay, so to reiterate in terms of methodology and data collection, we did do in-person surveys of stores in Seattle and a comparison area.
We were concerned with getting a geographic balance throughout the city, so in order to make sure we had stores spread throughout the city, we first divided the city into 16 smaller areas, and then we sampled a quota of stores from six different types inside these 16 different areas to hopefully result in a spread of stores that we survey across the city.
In this next slide, you can see the actual distribution of stores that we did survey.
The green dots are food stores, the blue dots are beverage stores, which are coffee shops for the most part, and the red dots are quick service restaurants.
And you can see that the distribution of stores in the city is not quite even, but we do have good representation in both north and south and central Seattle.
We also have a good spread in the comparison area, which is important as well.
So I had asked Jessica if there were 200 stores, if they knew how many stores in each district, and that was a question I just posed yesterday.
But we can see that it is spread throughout the city, and even if we don't have the exact number, We know that the distribution was, you attempted to do both north and south of the shipped canal.
We did.
And we have, I did ask for my research scientist to send the numbers.
So we do have at least 20 stores, at least 22 stores in each of the council districts.
District two is heavily represented with 60 stores, but the rest have at least, oh, excuse me, 21 in district four.
And this is somewhat a reflection of the fact that there are just more stores in certain parts of the city.
Can I understand the green, blue, and red.
So green are what again?
So green are food stores.
So this could be either supermarkets or super stores, smaller grocery stores and drug stores, or small stores, which are convenience stores that sometimes have gas stations attached, as well as the Costco warehouse.
And that's green.
And that's green or blue.
Blue is coffee shops.
And red is quick service restaurants, which are like fast food or fast casual.
So red are the McDonald's of the world.
Yes.
counter service yesterday.
So the fact that, take District 2 as an example, that has more of these three, they sell more, do I logically conclude that District 2 has more outlets to buy sweetened beverages?
There are more opportunities by virtue, there are more stores.
Is that a fair statement or am I over reading the facts?
I think on a area basis.
I'm not sure how this, how, if we looked by a population basis, if that would be true, but it seems like by area, yes, there are probably more stores in District 2 than, say, compared to District 5 up north.
So what did you surmise from that?
And as to tell you what I get out of that is I've always been told in looking at the sweetened beverage tax that, of course, that a lot of the sweetened beverage providers target certain areas, poorer areas, people of color.
So, okay, I've heard that, but would this suggest that that would be somewhat true, or is it just that this area, for whatever reason, they eat more fast food?
I mean, is there anything that you surmise from that, doing this research, or is that beyond the scope of what you're trying to look at?
So it is actually beyond the scope of this particular report, but what I would say is that it probably has to do a little bit with zoning, like from what I know of the city, potentially more of the area in District 2 is zoned for these sort of business opportunities compared to say District 5, that would be a guess.
But we can't say much from this particular research about whether either business owners or other folks are targeting particular populations when they locate their stores.
Okay.
Thanks.
It is a really important question that I raised yesterday as well because I was when we had our informal conversation because you look at Along District 2, there are a lot of dots here.
And it looks like down right near to me and down Martin Luther King Way in particular.
But I was concerned about, you know, we always talk about food deserts.
Are there stores where people can get fresh fruits and vegetables?
Or are there just more of these little stores where you go in and grab and go?
And it may or may not be the healthiest choice.
Yeah, so we do have underway as part of this body of work, a full report on food security and food banks in the city.
And as part of that, we've done some mapping exercises, attempting to locate places where there are, where there is limited access to- We're fine.
Okay.
Nobody passed out over there.
And what our mapping exercise has, shown, it's not quite public yet, but I would say that probably in the next month we will have a better answer to what are kind of the hot spots in the city where there may be really a lack of fresh fruits and vegetables available.
And they will be coming back sometime in the next, what, six weeks, two months to talk about that.
And we've decided that you will come back to this committee in no small part because we actually can be a little quieter sometimes and have a little longer time to ask questions.
So we're delighted that you'll be back.
But what I thought was a good thing is if I heard you correctly, You know, every time I see your name on it, I go, Jesse Jones, but it's Jones-Smith, I understand.
Jesse Jones, the other one, is a good friend of mine.
That you sampled, we sort of oversampled District 2, as an example, with 60 stores, I think, which if our Some of my theories, at least, are correct that that could give us some good information on the demographic that's actually drinking more sweetened beverage as well.
So we sort of supersized, excuse the pun, that area in terms of our sampling.
Because you did 60 stores there, right?
So that gives us some good data.
And roughly three times in D2 is what we did in D7, as an example.
Very good.
Okay, thank you.
Okay, great.
So, we ran through our store types.
Just to repeat, we have food stores and then we also have quick service restaurants and coffee shops included in our sample.
In terms of the actual sample numbers of stores, at baseline in Seattle, we surveyed 229 stores.
We had a really excellent resurvey rate and we were able to capture 89% of those same stores again at six months post-tax implementation, so that gave us 204 stores.
The numbers look similar for the comparison area, so we start with 223 stores.
We're able to resurvey 90% of those for 209 in the summer.
So if I can just interrupt one more time.
One of the questions that I had asked you yesterday was that, was that good to get that re-survey rate and to get the people to answer?
And Nadine, I think you said very good that to get an 89% re-survey rate with people that are saying you have the same store, you're able to make sure that we are the apples to apples kind of comparison.
The fact that you were out in front able to do this, bring people back, boots on the ground, I just am really grateful because it gives us a lot of sense of good work and security that the data is good.
Thank you.
We had a great team of data collectors, and they deserve all of the credit for having stores welcome them in a second time.
And some of those stores that we didn't get had actually closed or were not open permanently.
So yes, kudos to the team.
Okay, so moving to the next slide, we in these stores surveyed a large number of beverages, and in our analyses, we've classified these beverages into three main categories.
So our categories are according to both taxed and sugar status.
So the first category of beverages is taxed beverages.
These are, of course, beverages that have sugar added.
and include things like soda and juice flavored drinks, sports drinks and energy drinks.
The next category of beverages is non-taxed beverages that do not have sugar added.
So these include things like diet soda, diet energy drinks, but then also items like 100% juice and milk that have natural sugar, but no added sugar.
And then the final category is non-taxed but sugar-added beverages.
And these, we have three beverages in this category.
This includes chocolate milk, powdered concentrate drinks like powdered Gatorade or powdered Country Time Lemonade, and prepared sweetened coffee drinks where the first ingredient is milk, which exempts it from the tax.
It's interesting to me that the powdered drinks in the third category, and let's just say, and using your brand name, Powdered Gatorade as an example, that's not taxed.
All you have to do is add water with the sports drink that would be in a bottle that you buy.
Yeah, I wasn't part of the conversations about exactly which beverages would fall under the tax, so I'm not sure what the history is there.
But it does seem like an exception that allows a particular type of drink that is sugary to sort of slip through and be a substitute.
Okay, so going to the next slide.
For these beverages, we measured the price and we measure price in, we present price in our analyses in cents per ounce.
And this is so that it's easy to tell in relation to the amount of the tax, how much the cost of beverages increase.
So you'll remember that the tax is 1.75 cents per ounce.
Everything that we're about to show you is also in cents per ounce.
So we can compare it to that 1.75.
Additionally, we collected both the regular price and if a beverage was on sale, we collected the discounted price as well.
And in our analyses, we include the lowest price that that beverage could have been purchased for on that day.
On the next slide, one more kind of additional detail.
Oh, actually, sorry.
So again, for our statistical analyses, we are interested in estimating the impact of the tax on the price of these beverages that are subject to the tax.
And in terms of our statistical models, we use what's called the difference in difference model.
And these models estimate the degree to which the price of beverages subject to the tax changed above and beyond the price change of those same beverages in our comparison area over the same period of time.
So in the next slide, I have provided sort of a hypothetical example to help us conceptually explain how the difference and difference models work.
So just kind of drawing your attention first to the bottom panel that says comparison area.
One of the main reasons why we use a comparison area in a study like this is because we want it to stand in for the trends in prices over time that would have happened regardless of the tax.
So in this hypothetical example, we see that, you know, potentially in the, pretend that in the comparison area, beverages start off at $2 at baseline and then by June in 2018, say six months after the tax, the price in the comparison area has increased to $2.05.
So that $0.05, because the tax is not in effect in the comparison area, is due to other things like seasonality or economic conditions, and we don't want to attribute that $0.05 to the tax.
So we want to subtract that $0.05 out of the impact of the tax that we see in Seattle.
So if we move up to the Seattle panel, we see the same beverage starts off at $2, but it increases up to $2.35.
So that's a total change of $0.35 in Seattle.
But from what happened in the comparison area, we know that $0.05 of that should not be attributed to the tax.
So we subtract that out, and we call the tax impact the difference in difference, which is just that $0.30 that's left over.
Thank you.
Thank you for explaining that so clearly.
Okay, so then the one last concept that I want to explain before we get into our actual results is this term price pass-through.
So in addition to showing you the cents per ounce increase in all these beverages, what we also will show you is the percent pass-through.
This is the percent of the total cost tax that is passed through to the consumer.
So if we see that prices have increased by 1.75 cents per ounce, that's the amount of the tax, that would be 100% passed through.
So you'll see those numbers on the next slides.
Okay, so here's our first main result.
And here we see that on average across all beverages and all store types, the prices of beverages subject to the tax in Seattle increased by 1.70 cents per ounce.
And this is 97% of the total cost of the tax.
This average does mask some differences by beverage type and store type, which I'm going to get into in the next couple of slides.
So if we look at the next slide, you can see that for soda, the average price increased by 1.78 cents per ounce, which is a little bit over 100% pass-through.
If you move over to sugar-sweetened teas and sports drinks, you see that the pass-through is a little bit lower.
So we see an increase of 1.47 cents per ounce or 84% pass-through.
And then if we look at juice-flavored drinks or sugar-sweetened bottled coffee, these have even lower pass-through.
So about 63% pass-through on those different types of beverages.
If we go to the next slide, we've broken this out by store type, where we also see some beverages or some differences in the pass-through rates.
So for supermarkets and super stores, the average increase of price of tax beverages here is 1.51 cents per ounce.
This is 86% of the tax.
We see that in smaller stores, so small grocery stores, drug stores, and small stores, the price increased on average 1.82 cents per ounce and 1.80 cents per ounce.
So this is a little bit more than 100% pass through in these smaller stores.
And then finally, we've put the number for quick service restaurants.
We are the first team to our knowledge to measure what's happening in these quick service or fast food restaurants.
And we see that the price of these sugary drinks is increasing in these venues as well.
So 1.43 cent increase or 82% of the tax being passed through in those venues.
Can I ask a quick question about that?
I've seen in some fast food restaurants these giant machines that you go in and you can push one for water and one if you want your Diet Dr. Pepper and one if you want just a regular cola.
Who's keeping track of that?
And maybe how do they keep track of that?
I believe at the, actually I'm not sure is probably the best answer, but what some of our data collectors have reported is that the cashier is supposed to ask diet or regular and then charge the price accordingly.
I don't know if there's anything to stop the consumer from saying diet and pressing the button for regular if they were savvy in that way.
Okay, moving to the next slide.
So we wanted to also look at whether the tax resulted in any increase in price of non-taxed beverages.
So the rationale here is that distributors might decide to spread the cost of the tax to other products, products other than those taxed beverages.
Potentially this could make consumers less aware of a price increase and result in less of a decrease in purchasing.
And it also could just be a manifestation of learning which beverages are taxed and which are not.
So what we're seeing here in the non-taxed beverages is that in supermarkets and super stores, the price of non-taxed beverages did not increase on average.
In smaller stores, so the grocery stores and drug stores, we do see a small increase in the price of non-tax beverages, so 0.4 cents per ounce increase, which is equivalent to 27% of the tax.
And then in small convenience-type stores, we see a 0.77 cents per ounce increase, which is equivalent equivalent to 44% of the tax.
So we did a little bit of a deeper dive here to see which beverages were actually increasing in price.
And this ends up resulting from an increase in price of diet soda, diet energy drinks, and diet bottled tea drinks.
So the price of water and milk is not driving this.
Instead, it's the price of diet soda and diet energy and diet tea drinks driving these average increases.
So I think that's a really important point.
I know we talked a little bit more about this yesterday as well.
And the impact on this is that in the smaller stores, that they're raising prices across the board.
So whether it's, again, using my example, whether it's Coca-Cola or whether it is a diet Pepsi, that If you're buying that and you're paying more money for the diet as well, the distributor is not collecting that.
The store gets that money.
The individuals are paying it.
And if part of what we were trying to accomplish is to say that it's the sugary beverages that are made with sugar that the public health department is most concerned about, although there is reason to believe that diet equally or in perhaps a different way impacts people's health.
But that number of 44% in the smaller stores on items that aren't taxed to the distributor strikes me as something that we should at least be aware of.
I don't know what to do about it at this point, but I think being aware of it is the first step.
I think so too.
It is possible that, so it could be the store owners that are increasing the price of these beverages.
It also could be that the distributors made a decision to increase the price of both but not contribute, you know, not deliver a tax.
So we're not sure who's making that decision.
The other possibility is that it is learning and that potentially we are, we have done a 12 month data collection.
So it'll be interesting to see if this kind of evens out and if we see an average increase, if we see this go down at 12 months and that might indicate that there was confusion about what should be taxed and it might even itself out.
And if it goes up, it might have a different conclusion that we're reaching.
Yeah, potentially there's an opportunity to make more of a profit if we see it go up.
Thank you.
I just want to make sure that you saw that because it struck me as something that we needed to pay attention to.
Okay, so this next slide just gives us an example of what this 1.70 cents average increase means to the price of a beverage.
So if we look at a 20-ounce sugary beverage, on average, at baseline, these cost $1.99.
If we apply 1.70 cents per ounce increase, that would bring it up to $2.33 after the tax.
You can see for the 12-pack of sugar-sweetened beverages, This same 1.70 cents per ounce, because there are many more ounces, results in a big increase in the price.
So it goes from being $3.15 up to $5.59 for that 12th pack.
So this is a summary slide, just some of the key points.
We do find that the tax on sugary beverages is being passed through to consumers at higher retail prices.
The prices increased for nearly all of the beverages subject to the tax.
These increases differed by store type and beverage type.
So for beverage type, the largest increases were seen for soda and energy drinks.
And by store type, the largest increases were seen in those smaller grocery stores, small stores, and drug stores.
We certainly have limitations to the study.
We surveyed a large number of beverages.
We did survey 10,000 plus beverages over our two time periods.
But we did not, of course, survey all beverages out in the world.
We also did a sample of stores in Seattle and in the comparison area rather than doing a census of all stores.
And then finally, we did not include some popular stores like Trader Joe's, Whole Foods, and PCC because these stores tend to devote very little shelf space to sugary beverages.
So in terms of efficiency, it felt like a lot of cost data collector wise for little yields.
In terms of next steps, we have completed our 12-month data collection on the prices of beverages, so we've gone back to these same stores and repeated our survey, and we will be reappearing here in a few months with those results.
We also have been measuring how consumption among children changes, and we'll also be back here to present those results when they're ready.
And then, as I mentioned, we've been working on a food security report, and that is making its way through the review process.
And I think we'll be back here in four to six weeks to present the results for that.
We also have a number of other planned activities, but those are the near-term reports that you'll be getting from our team.
I think you mentioned that you were going to come back with more information by census track and poverty level, and also where there's food swamps.
And that was a term that was, I thought, we're looking at food deserts, but food swamps being the kind of food that you may not recommend that people be eating on a regular basis, and where those are mostly located.
That's right, so that information is included in the food security report that we'll be presenting in four to six weeks.
I don't know if we have a date for that yet.
February 27th.
Ah, terrific, thank you.
And in terms of the, yesterday we did talk about whether the price increases are different by, say, neighborhood level poverty or council district or some other geography.
And that wasn't in the scope of work that we originally planned, and it wasn't something that I could do between yesterday and today.
But that is something that is of interest to us, particularly we could look at border border areas versus inner areas since people can shop across the border.
So there are additional analyses that we are open to doing.
We also do have a lot of deadlines to meet the required scope of work in the ordinance.
Thank you.
I do have a question.
First of all, this is very rich.
Thank you very much for doing such a great job.
It had to do with the scope of work in the audit that I just needed my memory refreshed a little bit.
Can I just ask a few questions about that?
Sure, of course.
Let me sort of tell you what I'm interested in, at least.
I think it's in there, but I just want to make sure.
The first one being, are we just seeing behavioral changes in consumers, particularly in poor areas?
I'll use District 2 as an example.
Are people saying, oh, they're reaching for one six-pack of Coke, and they say, no, let me go get some water instead.
Are we looking, is that part of, I mean, that's what I want to know.
Is it working?
Is it discouraging bad consumption habits?
And secondly, if it's not working and people are saying, I'm just going to, you know, I want it so badly that I'm going to pay that extra two bucks.
I like the six pack of soda.
It's a couple of bucks.
And what are we learning from that?
So, I mean, is that sort of in the scope of work that we're trying to
I think Dr. Chan would be best suited to answer your question.
Right, that's a good question.
And the short answer is yes, we're answering this question of whether it's actually making a difference in people drinking less or more of the tax beverages.
And in addition to that, what about other beverages?
Because what if they're drinking less sugary beverages, but they're drinking more water?
That could be a good thing.
And the way we're doing that is following a cohort of families, both in the Seattle area as well as outside of the Seattle area, and the cohort of families that we have recruited, we have collected baseline data from them, we've collected six-month data from them, and we're in the process of preparing that draft report.
Well, you hit it on the head that the complaint from businesses is the obvious one that you're taxing this product and it's going to discourage sales.
But what I've always tried to explain to them is we're discouraging sales in one commodity but not in the other.
And so hopefully there's an increase in the other products.
And if that happens, you don't really care.
You're going to start buying less inventory in one area and more inventory in another.
So I'm just trying to see if It's still early and behaviors don't change when you're talking about decades of learned behavior.
I mean, I grew up on a, I never met a Coke I didn't drink when I was young.
So, and the other part of it is I'm sort of curious about the age factor because in all seriousness, I'm not sure when consumption decisions start to really come home for people to make decisions.
And I think it's as they get older and they start looking at diabetes and blood pressure and cholesterol issues, you never hear a kid talking about the cholesterol level, right?
So somehow I'm just looking at who buys, who shops in a lot of these different demographics and are we messaging the right thing to that particular demographic because you have someone that's in their 60s and someone in their 20s, and the same approach is not gonna work for these different people.
Kids just don't care about some of this stuff.
We're trying to get them to care about it now, of course.
So I'm just wondering if we sort of capture this, if we're able to look at the demographics of who we're trying to change as well.
I'll jump in here again.
We have a colleague, Professor Lisa Powell from the University of Chicago, who did a survey of adults in Seattle and outside of Seattle to find out how much people are reporting in terms of what they're drinking.
And she did look at how this is different by race, ethnicity, by gender, by income, and by age.
Her report is published on her website.
I could certainly send the link.
And you're right, you do see some differences by age and also by gender.
I'd love to see that report.
I know that our park department is working hard on healthy choices for teens and preteens so that when you go to a community center that they will have orange juice and water as contrasted to powered drinks and cokes in their vending machines.
So we know we're trying.
I'm not sure what the results are.
Do you have anything you would like to add, Mr. Auditor?
No, just that it's been a delight working with Public Health Seattle King County and the University of Washington.
Again, they've been really great partners and they have made adjustments in response to input received from city council members and their staff.
They've been really good about adjusting their study within the parameters of the budget to answer questions that council members have.
Good, and I want to acknowledge our Council Central staff.
Thanks for coming, Jeff.
Thank you for putting this together so quickly.
And what I'm waving around here, we will put on our website.
But this, during our last budget session, we've identified over $9 million for 2019 and over $8.8 million for 2020. These are the monies that are identified for investments in food access, nutrition, and food education programs.
So when people ask us, well, you're just, you know, collecting money from us, what are you doing with it?
This is a list of where it's going for food banks, for Fresh Bucks, for Farm to Table, for community-based meal providers, and so on.
And I will post this just because we spent a lot of time during our last budget cycle talking about this.
And everybody wants it to go to all of the good places.
So there was a little bit of arm wrestling about what percentages would go where, but we've got that now.
clear and Jeff, thank you for this.
I'm going to be posting this on my website for those who might like to see it.
And then we will welcome you back in February 23rd, 27th at this committee to talk about and answer the questions that you've just heard today and talk more about food deserts and what you've learned.
Dr. Jones, one last question.
It just occurred to me, and I just want to know if there's any truth to this or not, and that is, I was told, and I hate to mention specific stores, but this is the example that I had, that in Costco as an example, that the Costco in Seattle, there were actually signs to discourage people from buying their sweetened beverages there, and saying in our, this part I'm making up, in our Kent store as an example, it's cheaper.
And I guess in your field research, did you see any distributors, Encourage people to shop somewhere else number one and number two that seems like a great way to find out whether consumption habits or Purchases are different in certain models if you have one here and one outside of the city So did you get into any of that stuff at all or any of your researchers to see if there was just?
attempts to discourage
So we did- Buying in Seattle?
A little bit.
I'll tell you what we sort of know.
We did see the sign at Costco and we took a picture of it.
I'm not sure how long it stayed up, but it did say that, I think there were several signs.
I think there was one sign outside that said that the Renton store or some other store did not have the sugary beverage tax.
And then when the tax first rolled out, they had signs on individual sugary beverages saying that certain amount of that price was due to the tax and that tax was not present in their other stores.
So it did seem that Costco was actively encouraging people to go to their stores outside of the city.
And we took those pictures pretty early on in the tax implementation.
I'm not sure how long they continue to hang those signs.
We do know that some of the small store owners, instead of getting their beverages from a distributor, they actually shop at Costco.
And some of them so far have told us that they, you have gone to the Costco outside of the city, while some continue to buy their sugary beverages from the Costco inside of the city.
So there's lots of kind of individual business person decisions happening here.
So I think that's a really good point.
I think that's a really good point.
Your second point about the cross-border shopping, our colleague in Chicago, Lisa Powell, again, is going to have a really elegant study to measure that very well.
So we're going to have a lot of information about what happens in the city of Seattle.
We're going to have a lot of information about supermarket sales and kind of drugstore sales in the city of Seattle and then in a, I believe, like a two-mile buffer around, which would pick up that cross-border shopping, and then in a comparison area, which I think is Portland.
that we might see in Seattle is kind of differenced out because people are cross-border shopping.
So that is to come.
So tell us a little bit about your colleague in Chicago.
Is she working at a university there and has a contract to do this work here in Seattle?
Was she with you and then moved?
How does she come into this?
Lisa Powell is a health economist and she's also involved in studies of the impact of sugary beverage taxes elsewhere in the country.
And as part of our early phase of pulling together the academic research group, Lisa Powell has been one of our advisors and so she is someone that we consult with.
She also co-chairs a national advisory group of researchers who are looking at what is the impact of sugary beverage taxes, both nationally and I think internationally.
And we are turning to them to help consult with and advise us on these projects.
What has really been a nice collaboration is that because Lisa is doing similar studies where she's looking at with a cross-border shopping question in other parts of the country, We were able to work with her to help support funding for her to be able to add this piece for our local area.
Nice, thank you.
Thanks for explaining that.
Excellent.
Do you have any other questions for today?
Well, thank you so much for coming.
I appreciate your professional research, the good thorough work you've done, and simplifying this so it's very understandable.
I didn't, but that was kind of like what I was thinking about for me, making it clear for those of us that may not be as super economists he is.
But I thank you for that.
Thank you for coming.
Allison, thank you again for organizing this day.
David Jones, thank you for participating as well.
Appreciate it.
So the meeting's adjourned.
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